FBI and IRS Agents Arrest 12 Who Face Fraud and Money Laundering Charges
LOS ANGELES – 12 people have been arrested this week on federal fraud charges stemming from boiler room operations that solicited investments in independent movies with false promises of up to 1,000 percent returns and misrepresentations as to how investor funds would be used. Yesterday, Federal authorities arrested a total of ten defendants; one person in Florida and nine people in Southern California. Today, Federal authorities arrested two additional defendants in Florida.
The arrests are the result of two indictments returned on Wednesday by a federal grand jury. The indictments charge a total of 17 defendants – four of whom are named in both indictments – who allegedly participated in fraudulent fundraising activities related to independent film projects. While some of the movies were actually produced, the indictments allege that the defendants lied, gave half-truths and concealed material facts from investors around the nation.
Federal prosecutors have also charged an 18th person in this investigation.
A former CIA agent who ran a Burbank movie company called Q Media Assets has already pleaded guilty to conspiracy, mail fraud and tax charges in relation to the fraudulent boiler rooms.
In relation to the arrests this week, one indictment concerns the activities of Cinamour Entertainment LLC, which allegedly bilked investors who put money into independent motion pictures called “From Mexico with Love” and “Red Water: 2012.” The defendants raised money for the films through boiler room telemarketing operations, which made fraudulent pitches to investors. The charged defendants and other telemarketers cold-called investors from “lead lists” and solicited investments with false claims, such as that 93 percent of investor money would be used to produce and promote the films, and that investors would receive returns up to 1,000 percent. According to the indictment, the telemarketers failed to disclose that they would receive commissions when, in fact, often more than one-third of the investments went into their pockets. Little more than one-third of investor funds were used to actually produce and promote “From Mexico With Love.”
During the course of the Cinamour scheme – which the indictment alleges ran from early 2004 through May 2009 – the defendants collected approximately $15 million for “From Mexico With Love” from about 450 victim-investors. The movie cost about $5 million to produce and generated approximately $550,000 in its theatrical release in October 2009. The defendants raised about $2.7 million for the “Red Water” movie from about 100 victim-investors, but essentially none of the money was used to produce the film, which was never made.
The second indictment filed this week focuses on Q Media Assets LLC. This indictment alleges that telemarketers for Q Media fraudulently raised funds for films called “Eye of the Dolphin” and its sequel, “Way of the Dolphin” (which was later called “Beneath the Blue”). Telemarkers associated with Q Media also bought “lead lists” from the same San Clemente company that sold lists to the Cinamour telemarketers. As in the Cinamour case, telemarketers seeking investments in the Dolphin movies allegedly “made material misrepresentations, told material half-truths, and concealed material facts, when speaking to investors,” specifically concealing information about commissions and promising returns of up to 1,000 percent.
The defendants in the Q Media case raised approximately $5 million for “Eye of the Dolphin” and about $4 million for “Way of the Dolphin” from about 250 investors. “Eye of the Dolphin” made about $70,000 in ticket sales in its theatrical release, while “Way of the Dolphin” went straight to video.
The 45-count Cinamour indictment charges a dozen defendants:
Daniel Toll, 56, of Encino, who was president of Cinamour, will make his initial appearance in two weeks;
Joel Lee Craft Jr., 41, of San Clemente, who was the CEO of the San Clemente-based American Information Strategies, Inc., which sold investor lead lists to telemarketing operations that solicited investors through telephone cold calls, appeared in court yesterday;
James Lloyd, 47, of Lake Arrowhead, who was a “closer” for Cinamour and later operated his own boiler room that raised money for Cinamour and Q Media, will appear in court Thursday, June 23;
Paul Baker, 50, of Palm Springs, a closer for Cinamour, who later operated his own boiler room under the name Independent Essentials that raised funds for Cinamour, will appear in court today;
Bart Douglas Slanaker, 48, of Panorama City (who is already in custody after being charged earlier this year in another movie-related telemarketing case), was another closer who helped raise funds for Cinamour in several capacities;
Allen Bruce Agler, 54, of Canyon County, a closer who used the name “Paul Kingman” and raised funds for “From Mexico With Love,” appeared in court yesterday;
Albert Greenhouse, 58, of Delrey Beach, Florida, who also raised funds for “From Mexico With Love,” will appear in court today;
DeLitha Jones-Floyd, 54, of Lancaster, another closer, will appear in court Thursday, June 23;
Brian Emmanuel Ellis, 35, of Saugus, another closer, appeared in court yesterday;
Daniel Morabito, 31, of Redondo Beach, a closer, appeared in court yesterday;
David Nelson, 40, of Eagle Rock, a closer, will appear in court Thursday, June 23; and
Daryll Van Snowden, 40, formerly of Chatsworth and now of West Hollywood, another closer, is still being sought by authorities.
All 12 defendants are charged in a conspiracy count, as well as in several of the 15 mail fraud counts, nine wire fraud counts and 13 sale of unregistered securities counts that are alleged in the indictment. Additionally, Craft, Toll and Floyd are each named in at least one of five money laundering counts. The indictment also charges Slanaker with two counts of tax evasion.
The 33-count Q Media indictment charges nine defendants, including Lloyd, Agler, Craft and Morabito. The indictment additionally charges:
Robert Keskemety, 56, of Hallandale Beach, Florida, a closer, appeared in court yesterday;
Jady Laurence Herrmann, 34, of Lake Arrowhead, a closer, appeared in court yesterday;
Joseph McCarthy, 37, of Boynton Beach, Florida, a closer, will appear in court today;
Matthew Bryan Wellman-Mackin, 30, of Manhattan Beach, a closer, appeared in court yesterday; and
Robert Ramirez, 44, of Sunland, who was hired by Sellers to handle investor relations, appeared in court yesterday.
All nine defendants in the Q Media case, including those also charged in the Cinamour case, face charges of conspiracy, mail fraud, wire fraud and sale of unregistered securities. Lloyd is also charged in this indictment with two counts of money laundering. Craft is also charged in this indictment with two counts of tax evasion.
Slanaker and another man who is now deceased were previously charged with fraudulently raising money for another independent movie by claiming, among other things, that well known stars were associated with the project (see: http://www.justice.gov/usao/cac/pressroom/pr2011/035.html). Slanaker, who is charged with mail fraud and wire fraud in this case, is currently scheduled to be tried in this case on August 16 in United States District Court in Los Angeles.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
The charge of conspiracy carries a statutory maximum penalty of five years in federal prison or custody. The wire fraud and mail charges have a maximum possible sentence of 20 years. The money laundering counts alleged in the indictment carry maximum statutory penalties of 10 years. The charge of sale of unregistered securities has a maximum possible sentence of five years. And the tax evasion charges have a maximum possible sentence of five years.
The investigation into fraudulent boiler rooms raising money for independent movies is being conducted by special agents with the Federal Bureau of Investigation and IRS – Criminal Investigation.